Is your Association paying too much for venues? Free venue-finding - Myth or Reality?

Author
Rob Eveleigh
Managing Director | Brightelm
6th March 2019
Member roleChamber member

The events industry is booming in the UK, growing from strength to strength. We have new purpose built venues, a plethora of industry associations and finally we have the ear of government via the Events Industry Board.

However, the lack of transparency across the industry has been, at times, shocking. I write this based on my experience of both sides of the fence, venue and agency. In my career I have seen kick-backs, hidden commissions, and even “marketing agreements”, (fees charged to hotels groups and venues to gain access to educate bookers).

If the industry is not careful things could go the way of the Independent Financial Advisor with heavy and very costly regulation. However, what has specifically prompted this blog is the claim of “free venue finding” that many venue agencies in the UK make.

VENUES AUTOMATICALLY BUILD COMMISSION INTO RATES

Most venues in the UK now automatically build commission into their rates. The situation is now so bad that for years rates have been artificially inflated, by between 8 and 10% in most cases.

For a one-off small meeting of 10 people that might not make much of a difference to your costs, however, think how much this might be adding to your venue costs for a larger event, 300 people for 3-4 days for example….easily somewhere between £5,000 to £10,000.

This is mostly because organisations like the Hotel Booking Agents Association (HBAA) insist that venues offer something called “rate parity” (see HBAA Code of Practice 4b.7): if a venue receives the same enquiry both direct and via an agency the same rate has to be offered to both. The intention of this is that the agencies remain competetive with direct enquiries, however, the impact is that clients often pay more than they need to.

Can you imagine negotiating a good deal with a client only to then have to pay commission if it then comes via an agency too?

AGENCIES - THE GOOD, THE BAD AND THE UGLY

There are some amazing commission-based venue finding agencies in the industry. In my experience they are generally smaller, specialist and deliver amazing service to their clients. Those who specialize in a particular type of venue, or type of event, can become invaluable partners. If you’d like a recommendation please let me know.

But I’m struggling to think of another industry where a supplier has to pay so much money (often 10% or higher) to distribute their product or service. In most industries a supplier will pay a set fee to a particular representative or agency to help with distribution to a particular market. In the events industry the agencies claim that they work for the “client” but they get paid by the supplier, which confuses the client supplier relationship.

Many handle this well however there are those that abuse the commission offer. Some examples are below:

* Agencies prioritizing a “preferred venue” because they will receive a higher commission rate, or the reverse, not recommending a venue because it does not pay commission.

* Pressurizing venues to give a discount on a rate that is already commissionable in order to be able to fulfil a claim that they can save money.

* Calling a venue to “claim” a piece of business when it has been placed directly by the client

How does this behaviour deliver value to you, the true client and bill payer?

ARE YOU BUYING VENUES EFFECTIVELY?

If you run a large event there are really very few properties across the UK that can meet the brief. There are plenty of free venue-search websites and forums which are a good source of advice and contacts. The Delegate Wranglers Facebook page is just one of these.

WHY AREN'T YOU CONTACTING THESE VENUES AND NEGOTIATING A BETTER DEAL DIRECTLY?

Conversely, if you run a large number of events in one or many locations, shouldn’t you be buying more effectively and approaching one or two chains for agreed rates/discounts. Removing the need to pay commission allows such suppliers more wiggle room to negotiate without giving up their hard-earned margins.

Believe me, hotel and venue group representatives are likely to be queuing up to work with you if you take this approach. In fact, according to the many contacts I have at venues, you may find the negotiations a lot easier.

FEE-BASED WORK

I have become an advocate of fee-based work for agencies, and particularly venue finding, because it’s a great way for all parties to receive true value.

The fact is that commission is rarely a good representation of the value that an agency partner has delivered. A small enquiry can take days to deliver whilst placing a large piece of business can be relatively simple….which creates some sort of weird inverted revenue stream where an agency can be earning very little for a lot of work and vice-versa. This together with delayed payment (payment is only made post event) and the invention of the internet makes the commission-based agency model challenging to say the least.

If you do need help securing a venue using a fee-based knowledgeable event professional can really be an asset.

* Charging time-based fees focuses a client on giving a good brief

* Allows venues to be able to be more flexible on price as they don’t have to give 10% of the revenue away

* Or, in some cases, commission earned can be rebated to the client post-event or as a credit

IN CONCLUSION

Do contact venues directly when it’s relevant to do so, you are likely to get a better deal and save your organization a significant amount of money.

Do use a venue agency when it’s valuable to do so.

In my role I see great examples of innovation and modernisation every day. The events industry still has a long way to go in order to achieve true transparency but we are getting there, albeit slowly.

Do you want to join the conversation?

Sign up here